Health Check: How Prudently Does CellumedLtd (KOSDAQ:049180) Use Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Cellumed Co.,Ltd. (KOSDAQ:049180) does use debt in its business. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. The first step when considering a company's debt levels is to consider its cash and debt together.

What Is CellumedLtd's Net Debt?

As you can see below, CellumedLtd had ₩7.27b of debt at March 2025, down from ₩11.0b a year prior. However, its balance sheet shows it holds ₩7.50b in cash, so it actually has ₩230.3m net cash.

A Look At CellumedLtd's Liabilities

Zooming in on the latest balance sheet data, we can see that CellumedLtd had liabilities of ₩59.8b due within 12 months and liabilities of ₩2.53b due beyond that. On the other hand, it had cash of ₩7.50b and ₩21.7b worth of receivables due within a year. So it has liabilities totalling ₩33.1b more than its cash and near-term receivables, combined.

This is a mountain of leverage relative to its market capitalization of ₩52.1b. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. While it does have liabilities worth noting, CellumedLtd also has more cash than debt, so we're pretty confident it can manage its debt safely. The balance sheet is clearly the area to focus on when you are analysing debt. But you can't view debt in total isolation; since CellumedLtd will need earnings to service that debt. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

View our latest analysis for CellumedLtd

In the last year CellumedLtd wasn't profitable at an EBIT level, but managed to grow its revenue by 39%, to ₩142b. With any luck the company will be able to grow its way to profitability.

So How Risky Is CellumedLtd?

Statistically speaking companies that lose money are riskier than those that make money. And we do note that CellumedLtd had an earnings before interest and tax (EBIT) loss, over the last year. Indeed, in that time it burnt through ₩8.0b of cash and made a loss of ₩31b. Given it only has net cash of ₩230.3m, the company may need to raise more capital if it doesn't reach break-even soon. CellumedLtd's revenue growth shone bright over the last year, so it may well be in a position to turn a profit in due course. By investing before those profits, shareholders take on more risk in the hope of bigger rewards. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. For instance, we've identified 3 warning signs for CellumedLtd (2 are a bit unpleasant) you should be aware of.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.